Retirement Planning: 5 Ways to “Unsandwich” Our Next Generation

When someone casually asked Ms Emily Wang, a mother of two secondary school-going boys, whether she has started planning for retirement, she admitted that the question had made her stop to ponder. As she rightly puts it, there isn’t enough time to think about these things when you are financially responsible for both your parents and children’s expenses. Currently, most of the income goes to household expenses. Coupled with her husband’s income, she can manage small enjoyments such as eating out at restaurants on weekends. However, she has hardly saved for the future, apart from setting aside a fixed sum monthly in her savings account.

For another parent Mr Simon Liew, the family’s sole breadwinner with children entering tertiary education, there seems to be additional financial pressures from the increase in education costs and also from supporting his two elderly parents – one with chronic illnesses. He has started to cut down on luxurious family holidays, opting instead for shorter getaways to neighboring countries. In addition, his wife, who has been a stay-at-home-mum over the last ten years, is considering rejoining the workforce to earn some additional income to share the financial load.

Both Ms Wang and Mr Liew are typical examples of the sandwich generation, i.e. those who are squeezed between two generations requiring their financial support. According to a report by The Economist, about 20% of the total working-age population in Singapore falls within this demographic. For them, their CPF payout of between $750 and $2110 per month from age 65 onwards will probably not suffice for retirement, as suggested by this recent ChannelNewsAsia report. Besides, 54% of parents polled by KiasuParents think that S$1 million to S$2 million would be a more realistic figure required for retirement.

Nonetheless, equipped with better knowledge and access to relevant financial tools, it is believed that the present sandwich generation is well able to grow their retirement nest egg with the increase in financial resources and easier accessibility to financial products. In doing so, we can reduce our reliance on our next generation, thus removing the “top bun” pressures for them. When we make it easier for them to attain financial freedom, we are freeing them from becoming the next sandwich generation.

If you need some inspiration to take the first step to plan for your retirement, watch this video by Income.

Want to be your family’s last sandwich generation? Here are 5 ideas on how we can set this in motion.

#1 Mindset change: Our children are our retirement safety net. Not!

In past eras, people had children in the hopes that they could depend on the latter to fund their old age. Life was generally tough then and financial planning was not made accessible to all due to the higher barriers of entry. We’ve heard stories about folks who retired without a single cent in their pockets, as they had invested everything into their children, and had to rely on their offspring for allowance. Mr Lawrence Pang, who has elderly parents who used to be self-employed hawkers said: “My father has hardly any CPF savings. My sister and I each give him a monthly allowance and also pay for all his medical expenses for his kidney and eye problems.”

On the other hand, most modern, financially savvy parents work towards being self-supporting so that they don’t have to rely on kids for money. Even if they want their kids to give them money, it would be more out of love and filial piety.

As KiasuParents forumer Funz puts it, “… I will expect them to give us a portion of their income and I will not let them think that it is to contribute to the cost of the household but as a responsibility towards us, their parents.” Another forumer tyeogyh feels that his children shouldn’t be burdened with the fact that giving pocket money to parents is a must. The father of four also said that though he intends to inculcate the habit of giving him money when they start working, he will save the money and give it back to them “by way of paying for their wedding, housing, etc.” He anticipates that his children will have their own challenges and won’t want his kids to see him as a “debt collector”.

When the financial responsibility to support elderly parents is lightened or removed, our next generation can then focus on meeting their own life and family’s needs.

#2 Teach kids financial literary

Mirroring the above point, children should be trained from young not to expect handouts from parents whenever the going gets tough. To help them develop the skills needed for independent living, teach your children good money habits right from the get-go, whether it be using their pocket money prudently or earning extra by running errands or doing simple housework. There are also games and enrichment classes that teach kids how to budget, save and spend wisely. Through all these, they can learn the virtue of saving money and when they grow up, maximise their financial potential and thus, escape the cycle of being in another new sandwich generation.

#3 Create passive income with high returns

Very few busy parents can afford time and energy to take up more than one full-time or part-time job, so any income earned needs to be stretched to its full potential. These days, savvy parents earn passive income by investing in REITS, dividend stocks and bonds. For higher returns, they may go for real estate investment trusts (REITS). Many regard investing in REITS as more hassle-free compared to earning rental income (as it doesn’t involve managing any physical property or mortgage), requires a lower initial capital outlay and it also yields rather high returns of between 5% and 8% a year in dividends, according to this article.

Creating passive income in your retirement years is also important. Annuity plans that give a regular payout are also a good choice to invest your funds instead of leaving them in a bank savings account to earn interest that can barely beat inflation. You can tailor these savings plans according to your needs. Not only do they ensure a consistent stream of income once you retire, they usually come with some protection coverage (that can also be enhanced with riders) so your family can have peace of mind.

As part of the sandwich generation, being able to customise a plan to your needs is important with varying dynamics within each household. NTUC Income’s RevoRetire is a flexible savings plan which allows you to customize factors such as how long you want to pay your premiums, when you want to receive your cash payouts and for how long. This way, you can have peace of mind knowing that you will have a certain amount during your retirement years.

#4 Maintain quality of life by staying fit

The old adage “Health is Wealth” can never be overemphasized. No amount of retirement stash will suffice without good health as medical expenses can quickly wipe out our savings.

Singaporeans have the world’s longest life expectancy with an average of 84.8 years. But a study shows that a greater number of these years is unfortunately spent with illness and disability, which may potentially wipe out your retirement funds. Therefore, it is important to maintain our well-being through regular exercise and proper diet, thus reducing lifestyle-related risk factors for chronic illnesses. Income’s health insurance policyholders can check out Orange Health, an app that allows you to track your fitness and health related activities, earn Oh! Points and redeem vouchers with lifestyle partners.

Regular health checkups are also vital. These preventive health checkups can help you find problems early, giving you a better chance for treatment and recovery.

It is also important to safeguard the wealth we have accumulated for our retirement. By ensuring we are well covered by health insurance to take care of any hospitalisation expenses, we can ensure that our retirement funds will be protected and we needn’t rely on our children to contribute to our medical expenses, if any, during our golden years.

#5 Be content with what we can afford

Although the number of millionaires in Singapore (totaling almost 200,000 now) has increased and is set to rise even further, truth be told, the rest of the population will need to live with much less than a million bucks.

Regardless, non-millionaires can still lead comfortable and meaningful lives, as long as we manage our expenses and lifestyle expectations. When we have excess finances, say when we receive a bonus at work, we are happy to give our parents a bigger year-end hongbao or take our family for a long vacation. But should these become luxuries, we should not feel guilty about cutting back on such expenses. Afterall, being frugal is always a good way to save our money for a rainy day. More important also is how we express our love and care for our parents and children in other tangible and emotional ways.

Today, we are empowered to make the sandwich generation stop at ours. Your child’s fate in becoming the next sandwich generation lies fully in your hands. Start retirement planning if you haven’t done so. In time to come, it will be a lasting gift which our next generation will truly thank us for!